Saturday, June 1, 2013

Globalization and Democracy

Globalization
has been demonized by many economists. Globalization is considered to be the
cause of unemployment rise, degradation of democracy and to be a force opposed
to welfare estate.

Barry
Eichengreen wrote in 2006 apaperwhere he argued
that there´s a positive relation between globalization and democracy. Causality,
he states, works both ways from more democracy to more globalization and from
more globalization to more democracy. He applied several econometric models.

So far so good. However, Eichengreen warns that “as in any case where positive
feedbacks are present, there is the possibility of dynamic instability – that
is, a positive or negative shock may send the system off in the positive or
negative direction without limit”.

If the
negative economic situation in Europe is not
solved it will have negative feedbacks as more nationalism raises custom duties
and at the same time deteriorates European democracies. It wouldn´t be the
first time “If the system is dynamically unstable, then we can perhaps
understand how in the 1930s negative shocks to trade and democracy could send
the system down toward progressively lower values of both variables”